Will Markets Discount a Soft CPI? 

Articles From: Blue Line Futures
Website: Blue Line Futures

By:

President of Blue Line Futures

E-mini S&P (March) / NQ (March)

S&P, yesterday’s close: Settled at 3940.75, up 27.00

NQ, yesterday’s: Settled at 11,282.00, up 96.50

Fundamentals: U.S. equity benchmarks found themselves in rebound mode yesterday after Fed Chair Powell did not address monetary policy. The S&P finished at a four-week high, and price action continued to firm overnight. Undoubtedly, there are tailwinds from soft wage growth and weak Services data last Friday and relief that Fed Chair Powell did not carry the baton from Monday’s Fed speak. The focus now shifts to tomorrow’s CPI report. Given that inflation has been notably slowing will market participants front-run tomorrow’s release? There is certainly reason to believe so, but as we realized upon the CPI release last month and in October, a soft or hot report (respectively) could play out counterintuitively. Two out of the last three reports did this. Of course, the initial reaction was as expected for each, but participants are positioning with the trend, therefore discounting the overall impact of the report. Inflation surprisingly slowed on the October report, released in November, and therefore U.S. equity benchmarks roared higher and were able to broadly hold those gains. Today’s price action will be crucial because if market participants front-run tomorrow’s release, the report becomes pre-discounted and skews risks to the downside.

Do not miss our daily Midday Market Minute, from yesterday.

There is no major economic data on the calendar today. The weekly EIA Petroleum Report is due at 9:30 am CT, Thomson Reuters Consumer Sentiment is out at 10:00 am CT, and the U.S. Treasury will auction $32 billion 10-year Notes at noon CT. Tonight, we get CPI and PPI from China at 7:30 pm CT.

Technicals: Price action across indices firmed into the close to broadly finish at session highs. The tape has been levitating through much of the overnight and sets the stage for the melt-up cited above. Still, there are strong levels of resistance overhead in both the S&P and NQ, that cannot be ignored. However, rare major four-star resistance in the NQ has been dialed down to a three-star, cited below. This level held a direct hit on Monday, but given the rebound and retest, we will reduce it from a rare four-star. We will look to our Pivot and point of balance in each the S&P and NQ at … Click here to get our (FULL) daily reports emailed to you!

Crude Oil (February)

Yesterday’s close: Settled at 75.12, up 0.49

Fundamentals: Crude Oil is up more than 2% on the session and sharply from yesterday’s low. The narratives broadly underpinning strength are a rebound in Chinese demand upon reopening and the White House replenishing SPR over the next couple of months, uncertainly around Russian Oil price caps (which Russian Energy Minister Novak spoke on today), and the potential of a soft-landing in the U.S. The attention will shift to weekly inventory data, and expectations are for -2.243 mb Crude, +1.186 mb Gasoline, and -0.472 mb Distillates.

Technicals: Price action surged to new highs on the year, but the rally has so far been capped by major three-star resistance at 76.79-77.03. Upon a bullish inventory report, we do have overhead resistance highlighted in the levels below. Upon a pullback, we will look to first key support define this latest rally attempt, coming in at … Click here to get our (FULL) daily reports emailed to you!

Gold (February) / Silver (March)

Gold, yesterday’s close: Settled at 1876.5, down 1.3

Silver, yesterday’s close: Settled at 23.665, down 0.206

Fundamentals: Gold continues to outpace Silver, setting a fresh local high overnight. The U.S. Dollar and Treasuries are both firm, and this poses a crosswind of sorts, encouraging Gold and Silver to pull back from overnight highs. Today is ultimately a jockeying session across asset classes ahead of tomorrow’s CPI report. There is no major data on the economic calendar, but it would not surprise us to see a consolidation higher in the U.S. Dollar ahead of tomorrow’s report. The U.S. Treasury will auction $32 billion 10-year Notes at noon CT, and this could move the Treasury complex.

Technicals: Price action in Gold gasped for air overnight, trading to a high of 1890.9 before retreating slightly and consolidating at our Pivot and point of balance, which aligns with our momentum indicator at 1882. Silver’s jump overnight stalled in front of Monday’s spike, resistance at 24.24, and is again battling at our Pivot and point of balance at 23.98-24.09. In order for Gold to build for a test above 1900 in the near-term, it must hold out above major three-star support at … Click here to get our (FULL) daily reports emailed to you!

Originally Posted January 11, 2023 – Will Markets Discount a Soft CPI? 

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